Correlation Between Economic Investment and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Economic Investment and Major Drilling at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Economic Investment and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Economic Investment Trust and Major Drilling Group, you can compare the effects of market volatilities on Economic Investment and Major Drilling and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Economic Investment with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and Major Drilling.
Diversification Opportunities for Economic Investment and Major Drilling
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Economic and Major is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and Economic Investment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Economic Investment Trust are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of Economic Investment i.e., Economic Investment and Major Drilling go up and down completely randomly.
Pair Corralation between Economic Investment and Major Drilling
Assuming the 90 days trading horizon Economic Investment Trust is expected to generate 0.39 times more return on investment than Major Drilling. However, Economic Investment Trust is 2.54 times less risky than Major Drilling. It trades about 0.1 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.01 per unit of risk. If you would invest 11,406 in Economic Investment Trust on September 3, 2024 and sell it today you would earn a total of 5,919 from holding Economic Investment Trust or generate 51.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Economic Investment Trust vs. Major Drilling Group
Performance |
| Timeline |
| Economic Investment Trust |
| Major Drilling Group |
Economic Investment and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Economic Investment and Major Drilling
The main advantage of trading using opposite Economic Investment and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment position performs unexpectedly, Major Drilling can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Major Drilling will offset losses from the drop in Major Drilling's long position.| Economic Investment vs. Pason Systems | Economic Investment vs. Quarterhill | Economic Investment vs. Westaim Corp |
| Major Drilling vs. Algoma Steel Group | Major Drilling vs. Champion Iron | Major Drilling vs. International Zeolite Corp | Major Drilling vs. European Residential Real |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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